Retail Inflation Reaches a Two Year High

The rising cost of living continued to put pressure on households across India, with retail inflation climbing to 6.09% in October, its highest level in two years. The figure was 0.09 percentage points above the 6% upper limit set by the government for the Reserve Bank of India (RBI). It was also higher than the 5.54% recorded in September, marking an increase of 0.55 percentage points. According to data released by the Union Ministry of Statistics and Programme Implementation, retail inflation has now risen for the ninth consecutive month. Compared with the 2.74% recorded in January, the October rate was more than twice as high.

Higher prices of food, beverages, restaurant services and transportation contributed to the increase in retail inflation. Food inflation rose from 7.74% in September to 8.94% in October. While potato prices declined by 14.24% and cauliflower prices by 10.57% compared with the same month last year, several essential kitchen items became significantly more expensive. Onion prices surged by 116.22%, garlic by 60.74%, ginger by 48.32% and lemons by 47.30%. These increases added to the burden on household budgets. Milk, sugar and onions also continued to remain expensive, while dairy companies reportedly raised milk prices by ₹4 to ₹6 per litre.

The rise in inflation has also raised expectations of another increase in the RBI's repo rate. Radhika Rao, Senior Economist and Executive Director at DBS Bank, said the RBI could consider raising the rate for a second consecutive time at the Monetary Policy Committee meeting scheduled for December 2–4. According to Aditi Nayar, Chief Economist at ICRA Ratings, food inflation could remain elevated for another two months, making a 0.25-percentage-point repo rate hike at the December meeting likely. Market estimates also suggest that the increase could be as high as 0.50 percentage points. The impact of rising prices was particularly visible in southern states, with retail inflation reaching 7.26% in Telangana and 7.25% in Andhra Pradesh. Tamil Nadu recorded the highest rate at 7.29%, while six states reported inflation above 7% during October.